Nasdaq tumbles 1.6% as US-Iran tensions flare; SK Hynix ADR drops 9.32%

US President Donald Trump's announcement that he would resume a maritime blockade against Iran and impose transit tolls on vessels passing through the Strait of Hormuz sent New York stocks lower on Monday (local time).

The Dow Jones Industrial Average closed down 138.37 points, or 0.26 percent, at 52,498.64.

The S&P 500 fell 60.05 points, or 0.79 percent, to 7,515.34, while the tech-heavy Nasdaq Composite dropped 408.43 points, or 1.55 percent, to 25,873.18.

Tensions around the strait escalated further after US-Iran military clashes resumed over the weekend and Trump announced he would reinstate a blockade targeting vessels traveling to and from Iranian ports and coastlines.

Trump also declared that the United States would collect a toll equivalent to 20 percent of a ship's cargo value in exchange for US military protection of commercial vessels transiting the Strait of Hormuz.

The resumption of the maritime blockade and the toll announcement drove international oil prices up nearly 10 percent on supply disruption fears.

Brent crude futures for September delivery settled at $83.30 a barrel, up 9.6 percent from the previous session, while West Texas Intermediate rose 9.4 percent to $78.14 a barrel.

Hawkish remarks from a Federal Reserve official also weighed on investor sentiment.

Fed Governor Christopher Waller, a Trump appointee, said in a public speech Monday that the central bank may need to raise its benchmark interest rate in the near term if core inflation continues to climb.

The US Department of Labor is scheduled to release June consumer price data, including the core consumer price index, on Tuesday.

The escalating Strait of Hormuz standoff and the Fed official's hawkish comments led markets to raise expectations that the Fed will hike interest rates before year-end.

According to the CME FedWatch tool, fed funds futures markets raised the probability of at least one rate hike by December to 90 percent, up from 85 percent the previous session.

Bond yields also rose. The yield on the 10-year US Treasury note climbed 0.05 percentage point to 4.62 percent near the close of New York trading, according to electronic trading platform Tradeweb — its highest level in roughly a month since May 21.

Markets are watching closely for remarks from Kevin Warsh, the newly installed Fed chair, when he testifies before the US House Financial Services Committee on Tuesday.

A selloff in AI semiconductor stocks, amid ongoing debate over their lofty valuations, also deepened the day's losses on Wall Street.

SK Hynix's American depositary receipts tumbled 9.32 percent on their second day of trading on the New York Stock Exchange.

The decline erased a large portion of the 13.1 percent surge recorded on the ADR's first day of trading on Friday, pulling the price back to just above the IPO price of $149.

Other memory chip stocks also fell sharply, with Micron down 4.32 percent, SanDisk off 12.63 percent and Seagate dropping 5.46 percent.

Nick Percklin, an analyst at Coin Bureau, referenced the Kospi's sharp drop on Monday in an investor note, saying SK Hynix's near-record plunge in Asian trading "is no longer just a Korea problem — volatility is being imported into Nasdaq."

Major banks including JPMorgan Chase, down 0.58 percent, and Goldman Sachs, off 0.88 percent, also weakened ahead of their second-quarter earnings releases on Tuesday, despite expectations of strong results.

With banks kicking off the second-quarter earnings season on Wall Street, market research firm FactSet projects that S&P 500 companies will report earnings growth of more than 23 percent year-on-year for the quarter.